Carbon Taxes and Biofuels

In this project we are using a global economic model with land-use linked to a model of vegetation and soil processes to investigate how to extend carbon taxes to create incentives to avoid land use emissions or to increase carbon storage on land, or otherwise limit the climate implications of land use change. Carbon taxes could be a highly efficient policy tool for regulating emissions of CO2 and other greenhouse gases. However one aspect that undermines their efficiency is that existing legislation that proposes carbon taxes has generally not extended them to emissions of CO2 from land use and land-use change. Applying carbon taxes to fossil fuels would tax fossil inputs to biofuels production in countries levying the taxes thereby discouraging carbon-intensive conversion processes but would not provide proper incentives to avoid deforestation and the associated carbon emissions. There is also the possibility of leakage from jurisdictions with taxes to jurisdictions without them- importing the biofuels from areas using carbon-intensive conversion processes. How to treat biofuels in some of the proposed low carbon fuel mandates raises similar issues- how much carbon credit should a biofuel blend get and how does one evaluate the production related emissions, direct emissions from land on which the biofuels are grown, and even the indirect emission on land converted to other uses (such as grazing or cropland) when biofuels push into existing crop or grazing land. Given the tremendous interest in biofuels as a domestic, renewable resource and a possible alternative to fossil fuels it is important that policy measures designed to solve the climate problem do not unintentionally worsen it by failing to provide proper incentives for all greenhouse gas emissions and climate influences. This work combines the latest developments in science and modeling of the global system with analysis of policy design.